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Call today: 720.344.0312 Recent LTC Articles Flawed Advice: Consumer Magazine’s LTCI Article May Mislead Consumers Advisor Today December 2003 By Lucretia DiSanto Jones An article in a widely read consumer magazine has become a thorn in the side of many insurance and financial advisors – especially those who sell or specialize in long-term care insurance. The article, “Do You Need Long-Term Care Insurance?,” published in the November 2003 issue of Consumer Reports (CR), paints a picture of LTCI as mostly “a lousy deal” for Americans. Predictable, the article has raised the eye of many in the insurance industry, and responses to it have been prolific and spirited. Misleading Advice According to Wilma G. Anderson, an LTCI agent and sales trainer known as The LTC Coach, the CR article is “simplistic, has factual errors and does a disservice to consumers.” In her opinion, flaws in the article include: Advising consumers not to buy coverage until age 65 unless they have a condition like diabetes Advising consumers with more than $1.5 million in assets to self-insure Exaggeration of the cost of inflation protection on a policy Failure to point out that there are various policies with different levels of benefits, making them affordable for many people Anderson says that CR’s advice not to buy LTCI coverage until age 65 is risky – regardless of a prospect or client’s condition: “Most people in their 50s and early 60s can ‘health qualify,’ but many older people can’t.” The article notes that one in four 65-year-olds and one in three 75-year-olds do not pass the physical examination. Off-Loading Risk The article also suggests that individuals with more than $1.5 million in assets do not need coverage, rather, it states that they can afford to pay for their own care when the time comes. While upper-income consumers may be able to afford to pay for care themselves, they still should off-load the risk to an insurer. Anderson says, “Just because you could afford to rebuild your home does not mean you should cancel your homeowners policy.” “And, if high-net-worth clients do pay for care themselves, that’s the most expensive way to do it since they’re paying dollar-for-dollar for that care. Using a small portion of their earned interest to pay for an LTCI policy premium is much smarter.” Suggesting that high-net-worth individuals self-insure against future long-term care expenses overlooks a key point: the need for consumers to view LTCI as one tool of many that will ensure the strength of their financial and estate plans. “I think it’s very critical of Consumer Reports to have omitted the need for LTCI as part of a bigger picture,” says Anderson. “You have to show the client that the cost of long-term care can be the biggest risk to everything they’ve accumulated. Once you show them how LTCI fits into the bigger picture, they can usually see the need for it. Advisors must be prepared to respond to clients and prospects who decide to self-insure. When a client says they have the money to pay for it, I say, ‘Terrific, congratulations.’ Then I ask, ‘When your health changes you’ll be paying dollar-for-dollar. Is that what you want to do? I just want to verify that one more time with you.’ That usually gets them to listen,” says Anderson. If a client flatly refuses to purchase LTCI or does not qualify, it is the advisor’s responsibility to help the client set funds aside in safe but productive savings vehicles. Advisors should become familiar with the numerous annuities on the market that allow an annuity holder to access funds to pay for nursing-home care without incurring a surrender charge. Advisors should also become aware of dual-purpose policies, which, for example, provide life and LTCI in one policy. The CR article neglects to mention these important products. Misrepresentation In addition, the article fails to distinguish between tax-qualified and nonqualified LTCI policies and tells readers that inflation protection may “quadruple your premium” – surely a startling thought for readers. In Anderson’s experience, the additional cost of inflation protection is usually in the 35 percent to 45 percent range. Furthermore, the cost of not having inflation protection can be steep. “With costs going up significantly, when a client says, ‘I don’t know if I want to spend an extra 40 percent for inflation protection,’ you need to say, ‘OK, Let’s see if you will have the resources to pay the difference,’” she says. Will some readers refrain from buying LTCI because of the article? That is difficult to predict. But with CR’s faithful following of 4 million readers, advisors should be prepared to address any questions they might receive that may prevent their customers from purchasing LTCI policies. The key, Anderson believes, is to avoid becoming defensive: “Agents need to be prepared not to go into the ‘yes, but…!’ corner with the client. Rather, point out the other options. It will be up to the Agent to say, ‘Consumer Reports has always done a great job, but in this instance they’ve left out a couple of great companies.’” The CR article does have one virtue, says Anderson. It encourages consumers to buy policies from financially strong insurers. “This is crucial. It’s another reason why consumers need a good Agent – to guide them and help them choose a company that will have the staying power to pay claims 10 or 20 years from now,” she says. Click here to return to list

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